Archive for June, 2013

At the conclusion of the recent G8 summit at Lough Erne, a form of consensus was achieved in order to tackle the thorny issue of tax transparency: who is accountable for what and where!

Their full declaration is set out below, the aim, to improve tax transparency and to bring the international tax system into the modern age.

The G8 Lough Erne Declaration – issued 18 June 2013

Private enterprise drives growth, reduces poverty, and creates jobs and prosperity for people around the world. Governments have a special responsibility to make proper rules and promote good governance. Fair taxes, increased transparency and open trade are vital drivers of this. We will make a real difference by doing the following:

Tax authorities across the world should automatically share information to fight the scourge of tax evasion.

Countries should change rules that let companies shift their profits across borders to avoid taxes, and multinationals should report to tax authorities what tax they pay where.

Companies should know who really owns them and tax collectors and law enforcers should be able to obtain this information easily.

Developing countries should have the information and capacity to collect the taxes owed them – and other countries have a duty to help them.

Extractive companies should report payments to all governments – and governments should publish income from such companies.

Minerals should be sourced legitimately, not plundered from conflict zones.

Land transactions should be transparent, respecting the property rights of local communities.

Governments should roll back protectionism and agree new trade deals that boost jobs and growth worldwide.

Governments should cut wasteful bureaucracy at borders and make it easier and quicker to move goods between developing countries.

Governments should publish information on laws, budgets, spending, national statistics, elections and government contracts in a way that is easy to read and re-use, so that citizens can hold them to account.

No doubt parties that have been campaigning to have UK trading businesses, Google, Amazon and so on, taxed on profits made in the UK, will watch progress on the implementation of these lofty words with interest.

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HMRC have a recurring issue with individuals that have changes to their employment circumstances. Due to the “instantaneous” impact of PAYE, tax is deducted when you are paid, then if HMRC are unable to determine what allowances should be set-off against each employment, then under or over payments of tax may occur.

In the general run of things tax payers would not need to fill in a self-assessment tax return in order to advise HMRC if they have more than one employment or if they vary, add to or reduce, the benefits provided by an employer. However, all of these issues would need to be taken into account when Notice of Coding forms are issued to employers.

In an attempt to provide a simple means for taxpayers to communicate these changes, HMRC have decided to trial an internet based service, to be called PAYE Online. The idea is to provide a simple but secure way to advise HMRC of relevant changes in personal circumstances to ensure that the correct amount of tax is deducted under PAYE.

The new service is not to be considered a replacement for self-assessment. Self-employed individuals and those with more complex tax affairs will still have to complete a return. PAYE Online will also have no effect on employers’ obligations to submit payroll data to HMRC under the new RTI (Real Time Information) system.

An aggrieved public sector worker in Hungary was dismayed when a lump sum, paid to her on retirement, was taxed at 98%.

She appealed the imposition of the tax to the European Court of Human Rights. The Court ruled that the legislation, imposing the 98% tax, was in breach of Article 1 of the first Protocol of the European Convention on Human Rights. It awarded her damages of 11,000 Euros and costs of 6,000 Euros.

Older readers may remember that the UK imposed a similar rate of tax on investment income in the 1970’s when Lord Healey was Chancellor of the Exchequer.

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David Cameron has advised the G8 summit that the UK will draw up a register of beneficial owners of companies. The measure would aim to expose the real owners of businesses and strip away the secrecy created by faceless, offshore shell companies. Cameron has said he would make the UK register public as long as there is international support. At present this proposal awaits a formal decision by the G8.

The issue has now attracted the support of aid agencies who are lobbying for more transparency. An open letter has been released by these agencies which has been endorsed by 1,500 business groups and companies. The letter says:

“The current system enables the most unscrupulous corporations and wealthy individuals to deprive our governments of billions of dollars of revenue that should be invested in quality education, research, infrastructure and health care. We call for unanimous G8 support for key measures including automatic information sharing among all countries, a public registry showing beneficial ownership for all companies, trusts and foundations, and getting multinationals to publish a country by country breakdown of their accounts".

There does seem to be a gradual move to bring beneficial ownership into the public domain. The UK tax authorities would dearly like the information and the tax revenue that currently escapes via off-shore arrangements. UK businesses that declare and pay tax in the UK based on their UK trading activities are also keen to level the playing field. And lastly, there now seems to be a political will to accommodate the necessary registers.

Ultimately, it may be difficult for David Cameron to achieve consensus, Canada and Russia are known to be against the measure and the USA are ambivalent.

Those of you who read my blogs will perhaps have noticed I’ve not sent an email for a while!

Well please don’t be offended, I’ve just been waiting to see that our new website was working. We’re going to be automating some of the process and all recipients of this blog will be registered for our regular updates under the new website etc. All good fun.

In the meantime, have a great weekend and enjoy the newsletter attached.